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What you should know about the currency markets?
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For those of you going through the excitement of buying a property abroad there are certain elements that you should not ignore. One of these is exchanging your hard earned pounds for Euros.
The vast majority of you would have negotiated hard for a good deal on your property saving hundreds if not thousands on the Euro price you need to pay. What is often neglected is the exchange rate at which you purchase your Euros and more often than not those savings you negotiated for are thrown away by ignoring the fact that there are Specialist Currency Brokers who can save you more.
A Currency Broker is there to take away the stress and strain of watching those exchange rates, acting like a second pair of eyes, aiming to secure your Euros on the peaks of the market and not at the troughs!
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As you can see from the above graph, Sterling/ Euro levels have fluctuated over 5% in the past 6 months. To put this simply, if you were buying a property of Ј200 000 you could save Ј10 000 just by ensuring you secured your currency at the right time. For this reason, clients can book a forward contract to secure the rate now but for a time in the future thus eliminating the fluctuations in the price of their property. By booking a forward contract you also guarantee your rate of exchange even if the market starts moving the wrong way. Furthermore, they only request a 10% deposit on the total amount of currency required; therefore you keep hold of 90% of your sterling and allow it to accrue more interest in the UK or indeed give yourself the time to accrue the required funds.
It is important to recognise that yes, you can just use your bank, but remember you are not buying at commercial levels of exchange and this could make a significant difference to the cost of your Currency purchase. Typically we find that the savings achieved by using a broker can range between Ѕ% and 6 % and on Ј200 000 that could mean you save between Ј1000 and Ј12 000. The simple reason being, banks deal with all manner of products whilst Currency brokers deal solely with Currency transactions.
There are many factors that will influence which direction the market will move and a Currency Broker is there to indicate to clients what these factors are. For example, Interest rate movements often have a severe effect on the rate of exchange. Therefore, with The Bank of England holding interest rates for now and the ECB looking to raise rates, we are expecting a steady deterioration of the Sterling/Euro market over the coming months thus making your dream property cost you more than it needs to.
By using a broker we can tailor the various methods of purchasing currency to your needs ensuring you maximise what you can get from the markets at any given time, eg Spots, Forward Time Options, Stops and Limits.
The Spot Contract is the most basic and popular foreign exchange product. It is an agreement to buy or sell one currency in exchange for another. You have 2 days to settle the contract, at a price based on the prevailing "spot exchange rate" the current value of one currency compared to another. . Upon receipt of cleared funds currency is available for onward transmission. Although the spot market lets you buy or sell currency as you need it, spot exchange rate movements are highly unpredictable, even during a single trading day
A Forward Contract lets you buy or sell one currency against another, for settlement no later than on the day the contract expires. Unlike spot contracts, a forward contract eliminates the risk of fluctuating exchange rates by locking in a price today for a transaction that will take place in the future (up to a maximum of 2years). A 10% deposit is required to secure the contract and is payable within two working days with settlement due on the day the contract expires.
A Stop Loss Order is used when the market is moving in a negative direction for your currency. An order is placed on file with your broker to help ease the stress of adverse market movements.
A stop loss order instructs your broker to buy when the currency hits a certain point. The purpose of the stop loss is obvious – you want to prevent any further movement before the currency falls any further.
A Limit Order is an order to secure currency at a specific price that may not be currently available. This type of contract is particularly useful when the markets are moving in a positive direction for you.
Thank you to the Foremost Currency Group for this sterling advice. At FCG you will be allocated one account manager to look after not only the exchange of your currency, but the safe onward transmission of those funds, within your time scales.
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Benefits:
- Our fundamental business strategy is built on the grounding that we are a professional, highly focused brokerage with dedicated members of the team specialising solely in the foreign exchange market, ensuring the best price and service.
- Your clients will be guaranteed the same account manager who will take sole responsibility from the start to the very end, building a rapport to ensure that your clients funds are sent to the required destination in their timescale.
- Opening a trading facility with FCG is simple and straightforward, once an account has been approved your clients can benefit from the following:
- Free account opening with no obligation (Via Website / Fax or Post)
- No fees or commissions to exchange currency
- The ability to secure guaranteed commercial rates of exchange for now and up to 2 years in the future
- Proof of telegraphic transfer of funds in the form of a banking receipt
- Fully Compliant with H M Customs & Excise
- Specialists in Foreign Currency Transactions
- A Stress Free Personal Service
- The facility to set up regular overseas transfers (such as Mortgage or Pension Payments etc) with our Overseas Regular Payment Plan (ORPP)
Should you need to speak to a specialist in this area please contact Foremost Currency Group.
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